Reading a text file and getting the data is trivial:
with open('host.txt', 'r') as inf:
lines = inf.readlines()
hostlist = [ln.split() for ln in lines]
Now hostlist should be a list of lists;
[['192.168.0.23', 'root', 'secret'], ['192.168.0.24', 'root', 'secret2'] ...
But your list shouldn't have to contain more than the hostnames. IP adresses can be gotten from DNS that you have to configure anyway, and ssh can login without passwords if configured correctly.
Putting the passwords for all your virtual hosts in a plain text file has security concerns. If you want to go that route, make sure to restrict access to that file!
You can use subprocess to execute commands. I would suggest using rsync to push the desired files to the virtual machines. That minimizes network traffic. And you can deploy directly from filesystem to filesystem without having to roll a tarball. It can be as simple as
status = subprocess.check_output(['rsync', '-av', localdir, remotedir])
Where localdir is the directory where the files for the virtual machine in question are stored (it should end with a '/'), and 'remotedir' is the hostname::directory on the virtual machine where the data should land (this should not end with a '/').
For executing commands remotely, ssh is the way to go. Configure that for passwordless login, using ssh's authorized_keys file on each remote host. Then you don't need to put passwords in your list of hosts.